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ASX recovers ground lead by tech sector – The Australian Financial Review

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ASX recovers ground lead by tech sector – The Australian Financial Review

Updated May 20, 2020 – 5.01pm, first published at 8.34am 5.01pm – May 20, 2020Creditors call in receivers at Silver HeritageRobert GuyCreditors of Silver Heritage have appointed FTI Consulting as receivers and managers after the gaming company entered voluntary administration earlier this week. OPC Asia called in FTI’s John Park and Joseph Hansell after Silver…

ASX recovers ground lead by tech sector – The Australian Financial Review

Updated

Creditors call in receivers at Silver Heritage

Robert Guy

Creditors of Silver Heritage have appointed FTI Consulting as receivers and managers after the gaming company entered voluntary administration earlier this week.

OPC Asia called in FTI’s John Park and Joseph Hansell after Silver Heritage’s management appointed KPMG’s Ryan Eagle and Amanda Coneyworth as voluntary administrators on Monday.

OCP Asia, which declined to keep funding the business, will provide additional funding to the receivers while they undertake an assessment of the company’s assets.

Duxton sees some upside for beef exports

Robert Guy

Duxton Broadacre Farms is upbeat on the outlook for beef exports despite China banning imports from four Australian abattoirs.

In a monthly update to shareholders, Duxton says there is “some upside” for beef prices given Asia still faces a protein supply deficiency due to African Swine Fever, adding that a low Australian dollar will also be supportive.

The outlook comes as beef prices have come off as more supply has entered the market after a period of high prices.

“Over the coming months one of the major drivers of cattle prices will be supply, however the impacts of COVID-19 will persist in the background.”

Rex admits “erroneous” judgement call

Robert Guy

Regional Express says it made an “erroneous” judgement call in speaking to the media about possible plans to start city routes after a query from the ASX.

The regional airline says it did not expect the articles to have a material effect on its share price as “we have observed that nothing much excites the stock market concerning Rex besides news of exceptional dividends or profits.”

“We wish to reassure the ASX that Rex will err on the side of caution in the future.

Rex shares have rallied strongly after it revealed it was considering raising $200 million to strat routes between major cities.

ASX hits 10-week high

Luke Housego

The S&P/ASX 200 Index ended the day 0.24 per cent higher at 5573 points, the highest level for benchmark since March 11.

The market shook of a sharp fall at the open following a negative overseas lead, rising steadily over the day despite preliminary retail data for April revealing an historic monthly decline in sales.

Shares in technology companies recorded the best gains, lead by Nearmap and sports tech company Catapult Group, which both closed 9.4 per cent higher.

Payment companies were also among the top performers, with Zip Co gaining 8.4 per cent, Tyro adding 6.1 per cent and EML Payments closing 12.8 per cent higher.

Alliance Aviation shares surged 23.7 per cent after the company told investors it had snared a lot of new work carry mine workers to regional sites.

Most of the major iron ore producers slid after carrying the market higher over recent sessions. BHP shares eased 0.9 per cent, Rio Tinto ended the day 0.4 per cent lower, while Fortescus Metals Group edged 0.2 per cent higher.

EML Payments surges on trading update

Luke Housego

Shares in payments and prepaid cards provider EML Payments surged on Wednesday following the company s trading update released this morning.

EML told investors that revenue grew 20 per cent to $87.1 million in the nine months to March 31, up 20 per cent on the same period last year.

The result was supported by a jump in Gross Debit Volume (GDV) during the period, which reached $9.83 billion, up 55 per cent on the same time last year.

Shopping malls gift cards were expected to account for about about 55 per cent of revenue over the 2020 financial year before COVID-19. The company said with the ongoing uncertainty surrounding containment measures, it remains unable to provide guidance.

The company’s shares gained 12.8 per cent on Wednesday to close at $3.71.

Aspen swoops on Newcastle property

Robert Guy

Aspen Group has bought a partially refurbished co-living building in Newcastle for $3.75 million.

The building, in Cooks Hill, has 55 rooms that are suitable for singles, and is only about 60 per cent occupied.

The total all-in cost after refurbishment is expected to be $4.75 million or $3,167 per square metre of dwelling area.

The forecast net rental yield on cost is between 4.5 per cent and 5 per cent at gross rents of between $175 and $200 a week.

On Monday, the company reinstated full year earnings guidance of between 6.75¢ and 7¢ a security. Full year distribution guidance is 6¢ a security.

Aspen also announced on Monday it had acquired a rent-to-build development in Burleigh Heads for $3.15 million plus GST.

Aspen Group shares are up 2.3 per cent to $1.12. They have rallied from a low of 84¢ on March 23.

TPG/VHA: Six key points according to Goldman

Robert Guy

Goldman Sachs has taken a deep dive into the scheme booklet for the TPG Telecom and Vodafone Hutchison Australia merger and spied six interesting curios from the 358 page tome.

First, there is the prospect of a 67¢ special dividend paid to TPG shareholders based on the difference between actual and target net debt.

The proposed merged company will have net debt of $4.77 billion, with TPG having $2.5 billion at implementation date.

Based on the broker’s 2020 net debt forecast of $1.68 billion and an assumed $200 million in transaction costs, that leaves capacity for a fully franked special dividend of 67¢. The special dividend will be confirmed by June 14.

Second, the merged telco will seek to use a $1.3 billion tax benefit arising from deferred VHA losses.

Third, the implied 2019 calendar year earnings per share dilution of 46 per cent implies EPS of 16¢ a share, 46 per cent below TPG’s standalone EPS of 29¢.

Fourth, while there was no hard numbers on synergies there was a reference to “cost and capital expenditure synergies”.

Goldman notes that TPG loses $57 million of dark fibre revenue, while VHA loses $39 million of depreciation and $31 million of finance costs.

Goldman estimates between $236 million and $332 million in combined annual operating expense and revenue synergies.

Fifth, is the “tag -along” restriction on Vodafone and Hutchison selling.

TPG chairman David Teoh will have a 24 month escrow, while Vodafone and Hutchison will have a additional 36-month condition where any sale must be made to the other party before selling on-market. Any proceeds must be used to pay debt.

Six, Goldman notes TPG is seeing a “small increase” in broadband sales.

The work-from-home trader who shook global markets

Liam Vaughan

On March 9, US stocks had their biggest one-day point drop ever as the economic fallout from the novel coronavirus sank in. Within a week that record had been broken twice, only for the S&P 500 to register its greatest weekly gain in decades in April, after the Federal Reserve intervened by slashing interest rates and buying bonds.

This rattle of volatility arrives 10 years after another famously tumultuous episode in the markets – the so-called Flash Crash of May 6, 2010, when, without warning, the S&P 500 plummeted 5 per cent in four minutes, temporarily erasing $US1 trillion.

Navinder Singh Sarao.  Bloomberg

The incident sparked a government investigation and led to questions about whether the rise of high-frequency trading was having a destabilising impact on the markets. In the end, the US Department of Justice focused on a different culprit: a 36-year-old day trader named Navinder Singh Sarao who operated out of his bedroom in his parents’ suburban semidetached house on the outskirts of London.

With no ties to the world of high finance, Sarao accumulated $US70 million buying and selling futures as if he were playing a computer game. The bulk of his winnings came during periods of extreme volatility. He also manipulated the markets, according to the US government, creating a computer program that placed, then cancelled huge volumes of orders to deceive other participants about supply and demand – a brand-new offence known as “spoofing”. Authorities were careful to assert that Sarao’s antics had only contributed to the crash, essentially by creating false signals others reacted to, but that nuance was lost in the ensuing news coverage.

In 2016, Sarao struck a plea deal with US authorities, agreeing to tell the authorities everything he knew in exchange for a more lenient sentence. The information he provided on the dark arts of electronic trading proved so useful, the government incorporated it into its detection software, helping to lead to spoofing convictions for more than a dozen traders from banks, hedge funds, and high-frequency trading firms.

In recognition of his cooperation and a diagnosis of Asperger’s, Sarao was spared jail in January, sentenced instead to a year under house arrest – a month before the entire world went into lockdown. More painful for him, Sarao was also banned from trading during the kind of wildly careening markets he relished. This is the story of how Sarao first discovered his knack for playing that game.

Read the full story here.

TechnologyOne’s stretch goals may be out of reach: Macquarie

Luke Housego

TechnologyOne’s annual recurring revenue (ARR) goal announced along with its half year results release yesterday is unlikely to be achieved, according to Macquarie’s analysts.

TechnologyOne told investors that it hoped to reach ARR of half a billion dollars in 2024 as part of a series of “stretch goals” unveiled by the enterprise software provider.

To hit that target, TechnologyOne will need to grow recurring revenue by 20 per cent a year, which Macquarie expects will be out of reach for the company.

TechnologyOne chief executive Ed Chung. Supplied

“ARR grew 16 per cent and 15 per cent in FY19 and 1H20, respectively,” the analysis noted.

“Recent growth rates and law of large numbers suggests ~15 per cent per annum may be more realistic and could still present a stretch target.”

Commenting on the half year results for the period ended March 31, Macquarie said TechnologyOne’s financial performance fell short of estimates and will require a large jump in second half sales to achieve its full year guidance.

“SaaS ARR growth was below expectations, and acceleration of both new business wins and transition of existing customers will be required to maintain valuation support around current levels near all-time highs.”

After falling about a per cent yesterday following the results release, TechnologyOne’s shares have recovered today, gaining 0.8 per cent to $9.80 with a bit over a hour to go in the session.

Macquarie held its “neutral” rating on the company’s shares at a price target of $9.50.

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TPG to split in two, pay special dividend

James Fernyhough

TPG Telecom will split in two, with the larger company merging with Vodafone Hutchison Australia at the end of June and the smaller Singaporean operation listing as a separate ASX-listed company.

TPG founder and chairman David Teoh. Eddie Jim.

In the scheme booklet for the long-delayed $15 billion merger, TPG also said it would pay shareholders a special fully franked dividend before the merger and split go through. The special dividend will be funded by debt to bring TPG’s debt levels up to the agreed level osf the “merger of equals”.

TPG shareholders will be asked to vote on the deal on May 25, after which – assuming they vote in favour – TPG’s TPM ticker will disappear from the ASX, and the merged company will be listed with the ticker TPG.

The new merged company, also called TPG Telecom, will begin trading on a deferred settlement basis on June 30, with ordinary trading beginning on July 14.

TPG shareholders will receive one share in the new merged company for every share the held in the old company. They will also receive one share in the new Singaporean company, which will be called Tuas, for every two shares they held in TPG pre-merger.

TPG founder and chairman David Teoh, along with the rest of the board, urged shareholders to vote in favour of the merger.

Read the full story here.

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